Maintaining Market Confidence – An Update on Brexit

Nausicca Delfas, Executive Director delivered a speech concerning the preparations being taken by the FCA prior to Brexit. Key points to note from the speech include:

In line with the Government approach, with regards to the proposed changes to the FCA Handbook and Binding Technical Standards, the FCA does not propose substantive policy changes. The FCA have said that the changes will be consequential, “for example, removing references to the EU institutions and replacing them with the UK equivalent”.

The FCA is taking the baseline view that the FCA rules “must treat the EU as a third country” although there are some cases where this view has been derogated from. The FCA gives the example of UK UCITS (which in some cases make a distinction between investments in EEA assets and investments in the rest of the world). Treating EEA states as third countries could have caused disruption for some funds, and for investors. In the FCA’s consultation, it was therefore proposed to allow UK UCITS schemes to keep the same freedom to invest in EEA assets as they do now.

Further guidance has been given in relation to the Temporary Permissions Regime which the FCA has stated has had over 1,300 firms and funds express an interest in joining (see below).

The speech refers to the risks identified by the Bank of England’s Financial Policy Committee relating to the transfer of personal data between the UK and the EU becoming more restrictive therefore impacting the ability of UK and EU households and businesses to access services from, and continue contracts with, financial services firms in the other jurisdictions.

The UK Government has stated that in a no-deal scenario it will find the EU regime adequate, which will facilitate transfers of data from the UK to the EU. The FCA has stated however that it urgently needs similar action from EU counterparts.

The speech also refers to the negotiation of Memorandums of Understanding between the EU and the FCA to support cross border supervision of firms. It is understood that those Memorandums are currently being negotiated.be ready for a no-deal Brexit.

The speech references that work undertaken to onshore the EU rulebook demonstrates that “the UK will have the most equivalent framework to the EU of any country in the world”.

The speech outlines what firms should be considering to be ready for a no-deal Brexit.

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